I've been saving for retirement since my mid-20s, and I write a retirement-planning newsletter every month. Yet here's the thing: I don't plan to ever fully retire. And while most people list “retirement” as their number one investing goal, I don't think most other people should retire, either — at least not at age 64 for men and 62 for women, which are the average retirement ages these days, according to the Center for Retirement Research at Boston College.

I question the value and wisdom of retirement for financial reasons, for health reasons, and for “why should we encourage people to sit on their butts all day” reasons. However, in this post, I'll question retirement from a risk perspective: Can anyone really be sure that their savings and benefits will last for a few decades? Let's take a closer look.

1. Social Security has “issues.”
I've written before that all the talk of people getting nothing from Social Security is overblown; everyone will get something. But there are enough problems to suggest that younger and wealthier people should expect to get much less than their currently projected benefit. Not that the current benefits are enough to buy beachfront property; the average annual Social Security benefit is just $14,172. If that weren't scary enough, according to the Social Security Administration, more than half of elderly beneficiaries receive 50% or more of their incomes from Social Security; for 22% of married couples and 43% of unmarried beneficiaries, Social Security provides 90% or more of their incomes. The fact is, most Americans do not do a good job of planning for retirement.

2. Some people have pensions, but they have their own problems.
According to the Employee Benefit Research Institute, approximately 20% of the over-50 crowd receives income from a defined-benefit pension, with an average benefit of almost $18,000. However, the percentage of Americans who will receive a pension is shrinking. Plus, many of these plans don't have enough money to pay future benefits. (In fact, the massive underfunding of pension plans — particularly state and local plans — is one of the most underappreciated risks facing our country.) And when a company goes bankrupt, as retirees from Kodak recently learned, benefits can be reduced or eliminated. Most private plans are insured by the Pension Benefit Guaranty Corporation (PBGC), which has the power to take over underfunded plans or those of bankrupt or distressed companies. However, pensioners may not receive their full benefits. Furthermore, the PBGC is on the hook for $107 billion in payments yet has just $81 billion in assets. Government plans are not insured, but their sponsors can always raise taxes — though that's generally not very popular.

3. Savings to the rescue…or not.
I won't trot out all the stats about how people don't save enough, or how the baby boomers, as a group, are entering their golden years with too little gold (that is, net worth — I'm not suggesting that every retiree hoard the shiny metal). That's bad enough. My concern is that for these (often-too-meager) savings to last, investment markets have to cooperate, and, as we've seen over the past decade or so, they often don't. I'm not predicting Armageddon or anything like that; most of my longterm savings are in the stock market. But investing can be risky; we just don't know for sure how much a certain stock or even a bond will be worth a decade or two from now. Yes, you can play it safer with CDs or Treasuries, but only if your money will last as long as you do — and keep up with inflation — while earning 2%.
4. Or maybe my home equity will save me…oh, wait.
Several years ago, homeowners could take consolation in the rising value of their homes. Now, with prices down nationwide an average 30%, it's much more difficult to turn a nest into a nest egg. Of course, this wasn't supposed to happen. In 2005, Ben Bernanke, then an adviser to President Bush, said on CNBC, “We've never had a decline in housing prices on a nationwide basis. What I think is more likely is that house prices will slow, maybe stabilize…I don't think it's going to drive the economy too far from its full-employment path, though.” This just goes to show that even smart, well-connected people can get things very wrong, and that just because something hasn't happened before doesn't mean it can't happen.

5. Health care is unpredictable and expensive.
The big wild card in anyone's finances is health care — what illnesses or accidents will befall them, and how much of the costs will not be paid by insurance. Yes, most folks age 65 or older are eligible for Medicare, and approximately 25% of retirees also get help from former employers. But basic Medicare, by itself, does not provide comprehensive medical and dental care; that costs extra. Plus, the financial challenges facing the Medicare system dwarf any problems Social Security has. As for employer-provided retiree health care, that — like a pension — is a disappearing perk.

6. If I only knew when I'll die.
From a financial perspective, retirement is a mathematical equation that answers the question: Will I run out of money before I run out of life? You'll need a lot more money if you die a centenarian than if you die an octogenarian (which is how long the average person lasts, once she or he has made it to age 65). There are plenty of longevity calculators that will factor in your health, family history, and upholstery-potato habits to come up with an estimate of when you'll join that Great Spa in the Sky (I sure hope there are massages in heaven.). The standard financial-planning advice is that you should assume you'll live to 90 or 95. But the truth is, no one really knows their date of death, yet it's a very important variable in the calculus of retirement.

A caboodle of question marks
The bottom line is, no one can say for certain what their various sources of retirement income will provide a decade or three hence, or whether that income (whatever it is) will be enough to cover the income they'll need at that point. That said, there are plenty of ways to mitigate all the risks of retirement, which I write about in my newsletter and in my GRS posts. But for now, I'll just put the question to you: Do you think retirement is too risky? How do you plan to address any potential problems?

Finally, the message of this post is most definitely not “stop saving for retirement.” I continue to max out my 401(k), despite my hope that I'll be able to work forever. Nevertheless, many people are forced to retire due to bad health or a bad economy. Plus, I'm just 42. By the time I'm 72, I may have changed my mind — or my body has changed it for me — and I'll actually be ready to sit on my butt all day.

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There are 158 reader responses to "Is Retirement Just Too Dang Risky?".

Brian @ Progressive Transformationsays

The best way to handle this is to not retire. At least, that’s my plan.

There’s not way I am going to be able to work full-time for the rest of my life but if I can find myself creating work while doing what I love, it won’t feel like a job.

There are so many ‘retirees’ out there that work as a service to their local communities. Not only ones it allow them to create social interaction, but they suddenly have living expenses in their pocket.

Besides, we are all active people, I know a lot of those who have retired and are bored, just doing activities that are not as easy to do, all day long.

One of the great things about investing in and owning income real estate or a business is that each has the potential to provide ongoing supplementary income without the need to exert a lot of physical energy. When you can plan and prepare to establish additional streams of income you eliminate the need to ask, ‘How much do I need to save for retirement?”

We are in the middle of a societal shift away from manufacturing/industrial/physical labor towards digital/tech jobs. For those willing to expand and/or update their skill sets, there are ways to continue to be active/engaged and to supplement income even if forced to ‘retire’ earlier than planned or wanted.

The key is to learn about the options and to start planning as early on as possible.

As you mentioned at the end of your article, working for the rest of your life may not always be possible. My mother has been forced into retirement, first because of an illness, and now because of the economy. She’s even applied for minimum wage jobs, like working at CVS or Dominos, but no calls back. Those jobs tend to go to young people.

It’s really scary. I’m 31 and have no idea what I’m going to do. I feel like I’m saving a lot for retirement, right now about 30% of my income because I’ve taken on some extra jobs. But I don’t think I can work at this pace forever. I’d like in the next few years or so to have a kid, maybe buy a house, but both mean less savings for retirement.

In your comment, you mentioned that you are 31, so one can guess that your mom must be in her late fifties. Please don’t mind my one personal question, which is – At this age why you or your family letting her apply for work at fast food joints or similar jobs? Why you or your siblings can’t take care of her? She must have taken care of you when you were young. Right?
Their might be a social disconnect between us beacuse I am a Hindu from India(known for hindu undivided families), we have seen the bad times during british colonization and then during the partition of our country when these britishers wanted a safe passage to flee after looting our wealth for over 200 years. However, I will request you to think on these lines. Together a family can successfully swim the turbulent times.

I can’t answer for Meghan of course, but there’s definately a strong cultural difference. Own responsibility is a lot more valued here. My own parents have money issues, but they would absolutely hate it to take a handout from me. They want to be able to take care of themselves, not burden their children.

Besides that, it is also, socially, mentally and healthwise better for 99% of people to keep working. And there’s nothing wrong with a job at McDonalds to get those benefits. Also, assuming her mother lives to be 90, that means there’s another 35 years to go. 35 years of basically doing nothing productive is a very very long time.

And, there’s another point as well. I dislike the guilt card that is played here. Yes, my parents took care of me when I was small. Because they wanted to. Because they selfishly decided that they wanted kids, that their life would be better with kids. I had no choice in the matter. Which gives me no obligation to help them. They wanted to have kids, they knowlingly stepped into this (hopefully) realizing how much time and money and effort it would cost, but they still believed the pros outweighed the cons.

As such, I do not believe the kid has any responsibility to his parents, just because they raised him.

This is a good point and believe me is one that I have thought about. There are a number of reasons why I (and to a lesser extent my younger sister) are not helping our mother out. First, both my sister and I are still establishing ourselves in our careers, and only recently have begun to make some decent money. My sister got her first real job after doing her masters and spending 2-3 years afterwards working crappy cafe jobs because she could not find anything in her field. She is also heavily in debt with years of student loans, credit cards, etc. I am still working on my PhD and work as a teaching assistant and a sessional instructor. I still have another year of school before I can start to think about trying to find full time permanent work. I am trying to get myself into a stable financial situation having recently payed off my student loans and establishing an emergency fund and savings. I am trying to make up for years of being in school and not saving anything.

The second reason is that my parents are proud and don’t want our help. My step father still works, so it is not all bad. But as an auto mechanic his pay has really taken a hit with the economy. But I did mention helping them in the past, and my mother refused any assistance. As she said “I don’t know how we’ll get by but we always manage.” I think that they are just happy that their daughters are both financially independent and not mooching off their parents, so in a way I feel like I am helping them, albeit indirectly. Also both my sister and I payed for our own university education, neither one of us had help from our parents and instead took out loans, worked part time, etc.

And as Sonja mentions, the other reason why it would be good for my mom to work is that it would help for her to get out of the house. I wish she was one of those people who kept busy with lots of hobbies, but she doesn’t. Without going into too many details, she has battled mental health issues most of her life, and so it seems like it would be a good thing for her to get out of the house and do something rather than sit at home and worry and obsess about everything.

What I find difficult is trying to plan for expenses I don’t know about. For example, my parents’ generation couldn’t have anticipated they’d have home computers, cell phones, internet access and cable TV — yet many of these things are considered “essentials” for retiring baby boomers. I’ve read that people’s expectations of retirement have increased in the past decades and so — I would wager — has a sense of entitlement.

It makes me wonder what technological and medical advances are in store for me in 30 years.

That’s all well and good if you’re healthy, but not everyone is so lucky. My father retired medically at around 60 because he was told that if he didn’t his condition would kill him. He hates not working, but he’s too sick. Not everyone has a choice in the matter.

As a fellow Gen Xer (just turned 41, uh, yay), I’m a little surprised to hear what sounds like encouragement to never retire. I may be a little oversensitive on this matter, as I pounded my head against what felt like a concrete ceiling for years. Nobody wants to retire, so the next generation can never move up the ladder. Regardless of whether the not-wanting to retire is a free choice (loving the work, wanting to stay “sharp,” that kind of thing) or not-so-free (didn’t save enough money, had retirement savings decimated by the market), it still kind of sucks to be the Prince Charles of the workplace.

Also, the folks who started working in an era when everyone got a pension, and let that just poof! disappear before I even had a change to join up, now they’re all “yeah, I totally planned to never retire! That’s it!”

Social Security and health care are problems we can solve politically, instead of all planning to keep working til we fall over. I keep running into service workers – retail, restaurant, nursing – who are barely able to stand up. I had nightmares that one OB nurse was going to lean on my stomach when she tottered into my room after I had my son. But those folks can’t retire at 55 or 62 when their bodies give out, because of our political unwillingness to admit not everyone is “choosing” to work forever.

55 or 62 when their bodies give out? Who have you been talking to? I am 61. I look 51. I feel 45. And no … I don’t want to keep working to keep you from getting ahead. I would love to retire today. However, since I will probably live to be 90, that’s not really feasible right now … Even though I max out my 401k each payday … There is not enough to live well in retirement … I don’t want to work .. I have to!

What do you do for a living? Do you you pick up & turn patients all day? Drive a truck and load pallets? Cut up meat on an assembly line? Dig out and tuckpoint basements?

I have worked with lots of older people in office jobs – I think the oldest was a graphic designer in his 80s, who was a great and productive coworker. But in my daily life I see a lot of older, or sicker, people doing work they clearly can’t really handle anymore, in great pain, often leaving work undone that coworkers handle for them. There was a lady at the cafeteria at that same job who had such bad edema (I assume from heart failure) that she could barely stay on her feet by the end of a shift.

THANK YOU for the ‘Prince Charles’ comment. We are always hearing about the ‘new 40’ baby boomers, or the brilliant star children of gen Y (why)…

UGH you never hear anyone talk about us genXers unless it’s some doom and gloom thing about the sandwich generation shouldering both education costs for the young with care costs for the parents–but even the late baby boomers get most of that thunder.

England is even petitioning to skip Charles and have the more popular Harry follow Elizabeth.

I’m sure this is going to bring on the flames, but part of my retirement plan is having children. Asians often expect their kids to help support them in their old age, and as we will do for our parents, so I expect our children to do for us. We save too, obviously. I’m 23, and my husband is 26, and we max out our Roth IRAs each year. Our parents have savings too. But at the end of the day, we expect the younger generation to sacrifice on behalf of the older.

That’s what the whole world has done for the last couple millennia , and the rest of the non-western world still does.

It is also a great way to diversify your retirement, raise your children to succeed and then don’t burn bridges and alienate your children and they might actually let you move in with them if you need it.

Eh – I don’t expect my children to “support” me in the financial sense, rather just give me family support when I am too old for my own good. Children can act as good decision makers when times are tough towards the end. We shouldn’t burden the young with our lack of planning, but kids definitely are a good thing to have going into old age.

I wouldn’t have children for the sole purpose (or even as a part of the purpose!) to provide for you in old age. There are so many things that could happen – they may be unemployed, disabled, or rebelled and don’t speak to you anymore. Trust me, your kids will know why you had them – and if it isn’t because you simply really really wanted to raise kids they will know it. You should look into some statistics on how children care for their parents – the large majority are put in nursing homes with a few visits a year.

The cost of raising children will pay for all the retirement and health costs I could need.

my parents are afraid they will be left to my devices so they signed on years ago–before they retired– to an investment in a local graduated assisted living facilities specifically so I won’t have to take care of them.

thing is, I’m pretty sure it isn’t for thought of me, as much as a afraid of how they would have to live since we have very different life philosophies….~chuckles~

Or, if you choose not to have children, there’s an awful lot of potential monetary savings there, since children tend to be incredibly expensive. Hubby and I have no plans for children, and my number one fear is not having someone to care for me when I’m old. However, that fear alone isn’t a good reason to create a family, and there are no guarantees that your children WILL take on that responsibility. Our society is going to have to figure out what to do with people like me, though, because there will be increasing numbers of older people without children to care for them in the coming decades.

Or you’re like me and were unable to have children even though my husband and I wanted them. Our strategy has been to put our energy into a lot of non-familial relationships, including friends younger than ourselves. And this sounds nutty, but I am working really hard to solidify pleasant, likeable behaviors in myself while I’m still young enough to acquire the habit.

I don’t expect any friend to “take care” of me when I’m decrepit, but having a solid network of capable people who know I exist and are willing to help me out here and there is still my best bet.

I’m not sure what else to do, other than save obsessively, and pray to die swiftly when I’m still competent.

IMO there are never any guarantees that children will automatically take care of their parents. It’s a box of chocolates. One might give birth to Pollyanna or Damien. Who knows? And to base having children on the assumption of potential caregiving could be construed as being selfish in the extreme.

I think it’s one thing to hope that your kids will try to help you as you age (I hope that for my kids), but it’s another to count on them to take care of you. It’s unfair to assume that your kids will be in a position where they can support you. It doesn’t sound like you’re doing that, as you’re saving for your retirement now. But my point is that the statement, “We expect the younger generation to sacrifice on behalf of the older” may not be feasible or realistic in the future.

I know where you are coming from, Meg. My culture is like that as well. However, my parents let us know while we were still very young that they did not intend to live with us or expect us to take care of them until they were too old to live on their own. My mother will be 71 and my father 76 years this year and they still work hard on the land and sustain themselves. Their independence has made us actually help them a lot more than I think we would have had they been making demands from us. I want to be like them and sustain myself until I am too old before my kids take care of me.

While I understand where the expectation comes from, I think people really have to do the math. For instance, even if a couple has kids in their late twenties or early thirties, those children will be in their prime earning years or retired themselves when their parents need the most care and financial support.

I’ve seen it happen where part of the burden of care giving has fallen to the grandchildren, not just the children. (And the adult children were older and needed some help themselves.)

I understand that people expect family to step up, but I think they have to ask themselves just how many generations they expect to make sacrifices on their behalf.

I think this goes a couple of different ways – parents may expect children to help them in their old age, and children may need to boomerang back home one or more times while they get financially on their feet.

While we won’t force our son to live with us when he’s an adult, the house we bought is set up for multi-generational living so that if he chooses to, we can continue living under the same roof. (If he wants to move out, then the house is set up to allow a college student to live there for free or reduced room and board in exchange for house duties to help us in our old age.)

Hmm. I wonder if this is my in-laws strategy. We are worried because they are sort of retired because they don’t have a lot of marketable skills and have chosen not to work. However, they can’t afford this lifestyle and it shows every time an unexpected expense comes up. Since they have lived this paycheck to paycheck lifestyle for most of their lives we don’t think they have much, if any, in the way of retirement savings. Further, they still have quite young children and aren’t in the best of health. We are afraid that we will not only end up taking care of them, but also the younger kids- and we’re juggling just to do the best for our own family!

As a younger adult whose parents will probably retire in the next 10-15 years, I have to jump in.

I certainly think helping parents out when they have raised you is a reasonable expectation. But I don’t like the position that puts children in whose parents are assuming they’ll have that extra support and who aren’t rigorously preparing for imminent retirement. I think that’s a really unfair burden to pass on to the next generation, to expect them to retroactively pay for the lifestyle of the parents, potentially for decades.

This is especially true, considering the amount of student loan debt and overall lower wages that the current younger generations are experiencing. The reality is that they might just struggle to pay their own bills and get ahead. It’s quite a burden to expect them to support their parents.

How about we as parents right now eschew expectations to give our children the newest and the best material things and instead put more money into retirement? This will help them more in the long run.

My husband is from a family like that–they will care for their elders no matter what. But it is with dire consequences. My FIL has been supporting his mother (my husband’s grandmother) for over twenty years and is on the verge of bankruptcy and is having to work very long hours despite his own health problems. My MIL hates grandma being there and is very mean to her, but on the other hand, believes that it is her responsibility. (She’s very passive-aggressive). I fear what will happen if my in laws want to move in with us. We do not have the space or money or ability to support 3 more people in our house–esp since I have young children.

We all like to think of ourselves living long healthy lives, but in our society, we are now having children when we are much older (often in our 30s), and it’s not uncommon at all for health problems to occur in our 60s, meaning that for your children, they may be just wanting to start their family when your health falls apart and you want to rely on them.

I would not never want that life for my children. The only way this plan would work is if your children are bound to marry only a person who shares this philosophy, works in a job that has can produce a certain income and where they will likely be working long hours to bring in this type of income, lives in a house that can accommodate the needs of an elderly person with declining health, and perhaps even be forced to give up the option of having their own children (your grandchildren) if they see that their own parent’s health is declining at the same time that they were considering having children. (There are only so many hours in the day and it is incredibly hard to support eldery parents, raise young children, and have the income to do both). The bottom line is I want my children to have the freedom to make their own choices.

didn’t you mention you were like 31? You still have enough time to set up a retirement fund. As for kids don’t count on them being your retirement, my mom used to work with seniors and many of them didn’t talk with their kids anymore.

Besides don’t you think your own kids will have their own lives? What if they get disabled, terminally ill? You’ve given up before you’ve even tried, instead of burdening the next generation, why not work and set up your own retirement?

If I ever have kids I want to know I had them because I loved them but I’ll be sure to set up my own retirement fund. My kids could get disabled, die terminally ill, or some unknown circumstance.

Besides I would want my own kids to pursue their dreams and goals in life, I would hate to burden them with things that aren’t their responsibility.

If you become a professional you could make enough money to where you don’t need to rely on your kids. You’re 31! Life is not over yet. You have plenty of time. I hate seeing someone so young give up.

I would never do that to my kids, ever. I would never give up on my own retirement ever. What you need is some planning, pick up a Dave Ramsey book.

I think it’s easy at 40 to say you’ll never retire but when you hit 70 it’s a different story. My aunt retired from her office job around 65 and worked retail for another 10 years part time. Toward the end of that she was in a lot of pain and having a hard time getting through a 4-hour shift.

On the other hand my parents JUST turned 60 and my mom has already retired (that is, stopped looking for work) and my dad says he wants to retire as soon as he’s eligible. I worry about them but they do both have side incomes that bring in a little, plus they own their home and another outright.

My parents are some of the most active people I know and have tons of hobbies. For example, my dad built a 4-seat airplane, from scratch. They bike 200 miles per week. I promise you when they retire they will not be sitting around! Sometimes when I hear people say they’ll never retire what I hear is “I don’t have a life outside of work.”

What are your thoughts about taking a lump-sum pension payout versus risking that a defined benefit may shrink or disappear? We are in our mid 30s and my husband is eligible for a small pension (currently valued at about $650/mo). I cannot see him with this company for the long haul. He works for a media company, which makes me think the risk is high his pension will not be intact when we retire.

Unfortunately, doing the math requires a lot of assumptions that we really can’t answer with any sort of confidence. I went through such a decision when leaving a State job, and needing to decide to keep a pretty small pension or roll over the lump sum into an IRA.

I looked at it a copule of different ways. First, what was the present day value of the pension? But of course that requires some confidence as a what inflation will do over the next 30 years. I also tried to look at the expected value of the pension as of retirement age versus what I could expect to earn by investing it — but again, the same problem. And the biggest variable of all was how long I could be expected to live. Most of my figures came out ahead for keeping the pension if I was going to live to past 85.

Ultimatley, I decided that I didn’t have any confidence that the State’s pension would be there in 30 years, and opted for the rollover.

You’re right about the assumptions. But when I’ve seen companies push lump sum, they have made assumptions that I didn’t agree with at ALL – high returns on my investment, low or no fees, stable tax rates, etc.

The idea of retirement is sort of odd if you think about it. Did people 1000 years ago get to sit back for the last 20-30 years of their lives? Probably not. 2000 years ago? Not really. People continued to work as long as they could until they were too sick or elderly to do any physical work. The idea you can work for 40 years and take off another 30 years is a current manifestation and testiment to how well we have it now a days.

people still got frail…but granny sat in the rocker by the fire and knitted the kids mittens while mom was doing other things…granny rocked the baby, watched the babies, possibly washed dishes…grandpa whittled shingles, toys, broght in the wood if he couldn’t chop it–all those little things that dad never had time to sit down and do, but still needed doing…

I’m 33 and I already plan to die at my desk one day, most likely of a heart attack, preferably at a very old age. Or that the country will rip apart at the seams and I get shot in the crossfire. Or that aliens will invade.

Even if I save and save and save, I have no illusions that I’ll be able to retire like my grandparents did[0]. Don’t think I’m not preparing for it (I do read this site after all), but I don’t actually think it’ll happen.

I figure, if I plan for the worst, I’ll enjoy whatever better compromise actually comes out of it.

Also, remind me to start saving up for robot attack insurance. Because, you know, robots go after old people and all.

[0] My mom dying at 62 might have been the best thing to happen to her financially, and my dad is doing ok, but only after years of being downright cheap, and even then he’s being hit with horrible medical bills. Grandparents did just fine.

Having children is not a guarantee of care, financially or otherwise. My Aunt has been placed in a nursing home, despite having a husband, 4 children and umpteen grandchildren. It is heartbreaking for the rest of the family (brother, nieces, and nephews) to have no opportunity to help her remain at home. Neither can we take her into one of our homes, without legal intervention.

The lesson here – expect whatever you want, but don’t count on your children to take care of you.

Also, if you ARE having trouble caring for your parent(s), ask for help, and be open to support from the extended family!

I had a great aunt who, as a young widow, married another young widower with toddlers and raised those girls as her own. In fact, I was an adult before I realized my cousins were not blood.

After 35+years of marriage, when my aunt’s health no longer enabled her to care for my gentle, feeble senile uncle…his daughters whisked him off into a nursing home in their home city in the next state. They left my aunt to be “dealt with” by her family, which eventually meant nursing home by her choice. She didn’t think she would live long because of certain health problems.

They both lived almost 10 more years–apart–and died within months of each other. She never saw her husband –or her ‘daughters’ again. Broke mine and my mamma’s heart.

I think probably the best course of action is to plan for the worst and hope for the best. The best defense for the unforeseen is to be flexible.

Therefore, save lots! I certainly am. But also develop a variety of skills, ones that either make you money or save you money. Become self sufficient, or develop side income of some sort that you don’t mind doing after retirement. Be willing to downsize. Do you really need all of those bedrooms, push come to shove?

I think planning to retire is risky, but no more risky than planning to work longer, or work forever, is risky. All of it is dependent on the unforeseen. Therefore, plan to be able to retire, but be willing to work longer, or work forever, if you have to. You may not be able to work longer/forever, likewise, you may not be able to retire. It all depends….. especially if you are younger.

I simply don’t understand why retirement should lead to being “ready to sit on [your] butt all day”. The fact of the matter is, there are a lot of things you could be doing in retirement(travelling, volunteerism, and teaching come to mind first) that wouldn’t necessarily be considered a job, and some of these allow for expenses to be paid for if you’re creative enough.

Personally if you’ve got your health and adequate wealth, retirement is just another phase of life where you’re not necessarily tied to a full-time job and can actively pursue other interests.

I don’t understand how if you plan out your retirement and figure out your annual expenses, adjusting either upwards for expenses that may arise in old age or downward for expenses that will go away, why you don’t think you will be able to invest enough in assets to produce enough income to pay those expenses. If you are maxing out your 401k every year you will end up with quite an abundance of money by retirement age. Invest it in assets that yield a decent income and you should be able to retire. There are many early retirees that have figured this out. I am unsure why this Certified Financial Planner and staff writer for the Motley Fool can not figure it out. Maybe your expenses are way too high.

Economic and political stability cannot be assumed. Good health cannot be assumed. Even the fortunate early retirees you speak of will be in trouble if (for example) we undergo hyperinflation or they develop a debilitating and expensive disease such as Alzheimer’s.

It is indeed possible that things will work out for the best, but then again, they may not. Go back and re-read points 3 and 5 in the article.

Health insurance is a protection against debilitating disease. Certain investments spinning off income will be good protection against hyperinflation (think real estate providing rental income or stocks historically a good hedge against inflation). It doesn’t make sense to assume if I am able to put together a portfolio of investments that put out $100k in passive income a year, while I keep my expenses down to say $40k a year, that I would not be able to retire. Proper investments will provide more income with each passing year to hedge inflation risks. Before stating that my figures are not realistic, realize that it is not the figures that are important but rather the plan to create an investment portfolio that can generate more annual passive income then your annual expenses. Yes expenses may go up and you can plan for that. Purchase insurance and investments that generally move up with inflation.

Also, your example of alzheimers. You won’t be working if you have alzheimers and you likely won’t be enjoying all the money you worked so hard to save up.

Agreed about wanting to maintain at least a part-time job status into my later years. I don’t really believe in the traditional “retire at 65 and then enjoy your life” bit. Enjoy our lives now, save for the future, and never stop working. You can have a much more fulfilling life if you live it along the way well before you hit age 65.

My view is the opposite of the one advanced in this article. Retirement is today far safer than it has ever been before and far easier to achieve than it ever has been before. The trick is tuning out the message of Wall Street and all its Buy-and-Hold mumbo jumbo.

Buy-and-Holders believe that there is no need to take valuations into consideration when setting their stock allocations. The result is that they overinvest in stocks when stocks are priced to provide poor long-term returns and underinvest in stocks when stocks are priced to provide great long-term returns. It’s almost impossible for a middle-class person to accumulate enough assets to finance a decent retirement following that sort of strategy.

Valuation-Informed Indexers take most of the risk out of stock investing by following the 30 years of academic research showing that valuations affect long-term returns — they go with high stock allocations during time-periods when stocks are priced well (the 1980s and early 1990s) and with low stock allocations during time-periods when stocks are priced insanely high (1996 forward). The result is that over the course of an investing lifetime they earn far higher returns while taking on far less risk.

Studies show that Valuation-Informed Indexers can realistically expect to be able to retire five to ten years sooner than Buy-and-Holders. These research findings were not available to the retirees of earlier days. Those of us planning retirements today are fortunate to be living in the golden age of stock investing — if only more of us knew that this was the case!

As an artist/designer/craftsperson, I’m hoping I’ll work til I’m dead. They’ll find me slumped forward over my drafting desk or in front of the kiln or splayed out while packing a huge shipment of teacups.
That longevity calculator said I’d live to be 92 (97 if I bothered to exercise a little more). It’s funny to think I’ve got another 70 years on this planet, but based on levels of lead poisoning and silicosis amongst ceramicists, it’ll probably be less than that.

What’s the point of retirement anyway? I’m pretty sure all that inactivity just makes you wither away into a dusty old piece of human jerky. I want to be vibrant, eccentric and vaguely worrying until I pop my clogs!

It’s funny how people talk about retirement as if everyone has the same sort of job. Academic research is just starting to look at how career path and career satisfaction affects people’s desire to retire or keep working. Sometimes people just get physically and mentally burned out.

What scares me is getting dementia or other another disease that will physically or mentally prevent me from working as long as I want.

+1. I work for a university with faculty who are brilliant in their fields but…quirky (o.k., difficult). They stay forever; the admin staff, however, get burned out dealing with them. (Certain faculty have revolving doors in their offices for the admins who come and go.) In a recent retirement workshop about our pensions (yes, we still have pensions, amazingly), they mentioned that the average age of faculty retirement is 72, whereas the average age of staff retirement is 62. That correlates perfectly with my own observations. The other admins think I’m insane when I say I’m aiming for 70 for my retirement, but frankly, I want the larger pension I’d get and my family mostly live to their high 90’s. I just have to keep from burning out. :)

And yes, age-related dementia needs to be seriously considered in one’s retirement plans. While Alzheimer’s doesn’t run in the family, both my mother and m-i-l have or had suffered from stroke-induced dementia. Sometimes the strokes take out the parts of the brain that affect motor control…and sometimes strokes take out the parts of the brain that affect memory and thinking. :(

I am REALLY worried about somehow damaging my hands, or losing full function to something like arthritis. However, if I evolve into a “real” artist, like Damien Hirst or Dale Chihuly, I can just bark orders and get interns to do to work while I sip champagne cocktails brought to me by my robot butler.

Being able to save for retirement, and working the kind of job where you can make the call to work past the typical retirement age are luxuries that not everyone has. Please consider this before citing Social Security income figures to declare that most Americans are bad at planning for retirement.

Other than a mortgage, my parents (62-63) have no real savings. Like a lot of people, I’m petrified of them “retiring” as they don’t have enough money to support themselves and I’ll end up having to pay for them at the cost of my own retirement goals.

I wish more attention in the PF world was paid on this growing trend. To the poster above who said the plan was to rely on their kids to support them, ugh. That’s awful, and very unfair on your children in my opinion. Save and live within your means and take care of yourselves as best you can; don’t reproduce to ensure you won’t be in poverty in retirement. Overpopulation is a real concern for the future of the planet and human race.

I save about 20% of my gross pay directly for retirement and another 20% or so of net pay for long term goals (which could be early retirement). I don’t plan to actively work beyond my 60s, but hope to have enough passive income (from real estate or dividends or annuities) to support whatever capital I have to draw on.

Couple this with a relatively frugal lifestyle and LTC insurance and I should be okay. After about 75 I don’t think your non-medical costs will be anywhere near what they were in your earlier retirement days of say 60-75, so I think those calculators that have your expenses being the same (before inflation) every year are off.

I completely agree with you regarding the terrible notion of giving birth to children purely to produce built-in caregivers.

Sorry to read that your parents are going to be financially dependent upon you. I believe that much of the financial ignorance among older people today is generally because of a lack of information available to them when they were younger. Many people did not discuss their financial situations among themselves when your parents were young. There is no denying that the internet now provides a wealth of info for all ages but this is a resource that was non-existent back in your parents’ day. It was only after finding PF websites such as GRS myself that I was able to recognize my own severe problems with money management and change. Thankfully I still have time to turn things around somewhat but that is not true for the 60+ age group.

You have described my parents to a T. They had no savings to speak of and counted on the equity in their home to be their “retirement.” They both worked well into their 70s, but because my father started a business they refinanced their home for the capital and it was not paid off when they retired. With just SS and a very tiny pension coming in they both worked part-time to make ends meet. Once they could no longer work they took out a reverse mortgage. That kept them in their home and gave them some funds to draw on. It terrified my brother and I, but they stayed in the house an additional 4 years–through my mother’s final illness and death. They took out the RM at the height of the real-estate market (just before it crashed). We sold the house a few months ago and netted just 10 grand over what was owed on the RM, but because they had taken the RM out when the home was valued at its peak they got their money out of the home (they had pulled out the equity and placed it in savings). My father is using that money to live in a retirement community. He has no debt so while he doesn’t have a lot of money, he doesn’t have many expenses either. I’m breathing a little easier although it is still scary to think about what happens if he outlives his money. He is 85 and has about 5 years worth of funds in the back.

I would LOVE to see more conversations about this topic. The only thing is… what’s the solution? There isn’t really one, is there? We’re going to have to support our parents, and that’s that.

I don’t think it’s “terrible” for parents to count on their kids to help them in old age. It’s a cultural thing, as others have said. I wish it weren’t frowned on in the US. I think our culture makes it very hard for multiple generations to support each other, which is pathetic, and foolish.

I think it’s a dangerous situation that the boomers aren’t going to be able to support themselves AND their children don’t see it as their societal/familial/whatever duty to then take on that responsibility (or they won’t be able to even if they wanted to).
My parents didn’t need to support my grandparents since they had put away enough and lived simply. They were still able to leave something behind even though the last two lived into their 90s. In contrast, my mother died at 55, but she did say she was at least grateful that she didn’t have to worry about how she was going to afford living into old age.

Oddly enough, many boomers can’t afford to retire because they’re supporting their parents and children (boomerangs!)

I think it’s also important to realize that when the recession hit, people lost a fair chunk of their portfolio and that disrupted their retirement plans too. That could happen to any of us in the future.

An awful lot of my GenX friends are *already* taking care of their parents. I don’t know what happened to our grandparents generation if they were addicts, or saved nothing and became unemployed at 58, but I know a lot of Boomers in those situations, and they live with their kids.

I am so grateful my addict parent got sober (and remarried.) I watched a friend have to say “Mom, you absolutely have to have your own place before this second baby is born, there just isn’t room.”

Yet another topic we should discuss! Why is it that the Greatest Generation seemed to do well in retirement, while many Boomers are panicking?

I wonder if it has to do with our expectations. Maybe the Boomers expected they would get everything their parents did — a healthy SS system, plus pensions, a paid-off house, etc. Then that all fell apart. But meanwhile, we’re stuck with the expectations of a lifestyle that such a system provided. We expect that people today will retire for 20+ years, live independently, and not rely on anyone for help.

Except now they have to pay for it all themselves, from personal savings.

Or maybe it’s something completely different. I’m just thinking out loud here. But it would be AWESOME to see a GRS post that really looks at the facts — were the GIs more comfortable in their retirement than the BBs? If so, why? (hem hem, Brokamp, are you listening?)

My dad is of the “I’ll work until I’m dead” persuasion. He’s nearing 60 and has been self-employed for the past 20 years. He has very little set aside for retirement.

Other than selling the house (paid off 5 years ago) and my mom’s moderate 401K, I’m not sure what they plan on doing if my dad gets injured or develops health problems in his late 60s like both his parents did. He has already had to refuse a few jobs because the dust and mold in old houses aggravates his lungs.

(I try to talk to them about catch-up contributions and investing, but I think they’d rather keep what capital they have liquid in case something like that happens.)

They also think I shouldn’t open an IRA until I have a job that matches contributions (I’m 25 and finishing grad school), but in this economy I don’t want to wait. A few thousand a year in a Roth IRA might not seem like much now, but it’ll make a big difference later.

Start as early as you can Jennifer. If things go well, you’ll have lots of choices. If they don’t you’ll have something to fall back on. Savings and minimal debt have gotten me through plenty of difficulties. And there are ways to get at the money in cases of true needs. ROTHs can be used for house down payments, I believe.

Just last week I made it through my company’s 7th round of layoffs in the 11 years I have been here. And what I’ve learned from this experience is that very few of my co-workers chose when they retired – it was chosen for them. Most of them got the ax in their late 50’s, early 60’s. None of them were ready for retirement and were bitter that their hand was being forced. None of them have been able to find full-time employment that provides health insurance. So until this country changes its mindset and decides that people in that age range still provide value, believing you’ll have much choice in how long you work for seems quite foolish.

While the majority of all unemployed Americans are under 25, the majority of *long-term* (more than 6 months) unemployed are over 55. That means more older workers are not being rehired; the ones 62 and over are retiring because they can at least get social security income when their unemployment runs out.

Perhaps the study accounted for this, but I would presume that it was just as likely that those who retired earlier were likely of worse health already — and were thus more likely to retire — whereas those who were healthy were able to keep working.

Confusing causation with correlation is a huge pet peeve of mine. The media loves to present these research studies as proven causation, which completely misinforms the public, since not everyone understands research methods and statistics. Great job of pointing it out!

You raise a lot of good points and it’s true to say that many of us who are contemplating retirement have not saved enough money. But, where do you draw the line? Often times, a person has to look at what their resources are versus the ways in which to make the most of those resources. One just can’t live a lemming life of fear. In our case, I know we haven’t saved enough money because all of it was spent as fast as it came in but that doesn’t mean that all is necessarily lost. We have 5 years in which to save as much money as we can and then we are going to pull the plug on the workaday world. That’s risky but no one knows what life has in store.

Finally, I’d just like to say that not all retirees are lazy couch spuds who plan to sit on their butts all day!

As an early retiree, I can tell you that retirement is not sitting on my butt all day. I’ve been retired three years now and I’m as busy as I was when I operated my business. Only now I do things because they interest me, not because I need to earn a living. My wife and I had lives outside of work all during our working years. Retirement has allowed us to expand those lives and pursue new interests.

As for money, first we had very low lifestyle expectations for retirement and we retired without any debt. We’ve always lived far below our means and continue to do so in retirement. Consequently, we continue to save and add to our nest egg while in retirement. We’re invested entirely in CD’s and annuities, always have been. And yes, these historically low interest rates have reduced our cash flow over the last three years by 40%, but we still have all that we need and continue to add to savings. We just don’t travel as much as we did the first two years.

We’re living on one pension and savings now, with another small pension, SS, and IRA money to come once we turn 66.

Health, of course, is the wild card. There is no way to predict the future state of our health or the cost to maintain it, or insure it, for that matter.

We run the numbers frequently and should have more than enough to last us thirty years or more.

When I was in my twenties, there was raging inflation. At that time, no one thought they would be able to afford to retire, either, not with 10% annual inflation. In the early 80’s, there were predictions that we’d never see single digit mortgage interest rates again.

I would like to point out that the majority of dedicated volunteers out there are retirees, those old enough to still have decent pensions. I worry that many organizations that rely heavily on volunteers – such as our local food bank – will fall apart as more people are forced to continue working for money as long as their health allows.
But I suppose that’s life.
I have to plan to live to be 100, based on my health and family history. My grandmother retired at 65 and hasn’t slowed down a bit, traveling the world, gardening, generally keeping busy. (She’ll be 90 next year.) She has rarely worried about running out of money. I save as much as I can, but if ill health, economic conditions, or burnout force me out of work before age 75 or so, I don’t know what I’ll be able to do. I work on my health and my education, to keep myself well and valuable for as long as possible.

Relying on your kids to care for you is all right if you live in that kind of culture. But it’s pretty damn unfair to your kids. “We just had you so we’d have a nurse in our old age. What, you expected a life of your own?” I don’t and won’t have kids, and I don’t expect ‘society’ to take care of me either; I’ll take care of myself as long as I can, and then hopefully I’ll die.

Over and over again I hear (as a fee-only financial planner)”oh, I’m never going to retire”. Almost every time it’s said by people in their fifties who haven’t saved anything and don’t want to change their spending habits. It’s not because they like their jobs so much.

It’s great to work at something you love as long as your health holds out. But if you have a stroke, or need hip replacement, or maybe your kid moves out of town and you’d like to see your grandchildren more than once a year, well, retirement might look a teensy bit more desirable. Are you going to totter into the office at 85? And if your job is the slightest bit physically demanding, you’re probably not going to make it past 70.

Planning for retirement gives you the choice. Not planning, not saving, means your choices will be made for you.

I’ve worked at firms that routinely fired non-exempt staff between 50-55. Who felt the blow? Receptionists and mailroom and clerks, the occasional secretary–especially if she was a legacy secretary and her partner retired.

Illegal? sure. Did they know it was illegal? Shoulda…they were law firms. But the burden of proof was on those that couldn’t afford to fight and they knew it.

I have taught public school for 36 years and at age 57 am ready to stop. I love what I do and I love my kids but government interference has made it almost impossible to remember that we are here for the kids. Still, I need health insurance. I will get a state pension but it will barely covver my insurance permium for my husband and me when I retire. I don’t intend to “sit on my butt” when I walk out but be involved in activities that can make a difference in lives. I also don’t expect our son to take care of us. It’s not an easy decision.

My mom spent a few years teaching at the community college after she retired as an elementary school teacher, and loved it. Though I think once she got over the “what will I do all day” fear she enjoys actual retirement more.

As many have already stated, there are many unknowns in retirement, not the least of which is one’s health. However, just as saving, investing and living below one’s means doesn’t guarantee a comfortable retirement, it sure goes a long way towards improving the odds of such. In this same way, investing in one’s health by making certain lifestyle choices (eating right, exercise, not smoking etc etc), doesn’t guarantee good health in the years to come but certainly increases the likelihood. (so many ailments are the result of lifestyle choices and not simply bad luck) A simple concept: for every hour spent reading PF blogs and rebalancing one’s portfolio, spend another hour jogging, biking, swimming, walking, hiking, dancing, yoga-ing. The return-on-investment from these activities is unmatched.

Wow, the life expectancy calculator said 101. My retirement calculations have only been to 95. At 49 I feel I am just getting started in many ways. I have enough saved to create a frugal retirement at 70 — although apparently my planning is about 6 years short — now I am planning a new career doing things I love that will contribute to the world. While I am planning that, I also think about that transition to a partially retire lifestyle. I picture a day of doing some writing, maybe some consulting in my field, working in my garden, walking in the woods, making music, some travel. One of my professors just retired and she is busier than ever, but doing exactly what she wants, delivering lectures around the world, supporting causes she believes in, walking in the woods, playing with her grandchildren. That is so much how I plan my life, at least up until around 80 or so. Haven’t thought too much about that last 20 years. I don’t like to think about losing some abilities such as less physical stamina, lost of mobility. Oil painting, maybe??

What a good article!! You are right, retiring and than doing nothing is very dangerous. But retiring and having an active life including one or two side-jobs seems a very healthy life to me.
I retired 5 years ago at 41 from the regular workforce. We now live from our nest egg, plus little side-earners. Things like a consulting job or a bit of trading or giving advice to start-up companies. None of these jobs generate wads of cash, and they are totally un-plannable, but they allow us a bit of luxury now and than and they keep us fit. And by spreading our eggs over lots of little basks we reduced the risks.

I’m 62 and working. My wife is 58 and has not worked in 4 years. When you lose a decent job in your 50s or 60s, through no fault of your own, it is really hard to find a replacement. So she just stays home and makes the home. So age discrimination, right or wrong, IS a factor. Many of you won’t be able to work forever because of this. We have had financial problems in the past. But we have frugal religion and have had it for a few years. I drive an 8 year old car. I brownbag my lunch. No cable or satellite, etc. All debt is now paid off, except for our mortgage, which God willing, we have 12 more months before it too is paid off. At that point, we will have a paid for home worth 250k, and about 250k in retirement savings. I’m planning to go to age 66, and my social security projected is $2,507. I will have a small pension of $800 available at the same time. DW will start her socsec 4 years later at about $1,250. Pretty much all expenses are negotiable and manageable. There are many decent homes available for $100k around the country, we might downsize and put some money in the bank. Grow our own vegetables, work part time for socializing and a little extra income. But at my age, I am tired of the pressure of a fulltime career position. 4 more years is the max I would want to go..

I think that’s the general advice because for most people it is true but that’s not always the most applicable. My husband and I, for example, are in the 33% tax bracket so we max out our 401k’s every year no ifs, ands or butts. Plus neither of us have qualified to contribute to a Roth IRA for several years.

I think people should max out every tax sheltered savings vehicle for retirement that they can. For example, I had a baby this past year and chose to take off 3 months and have fallen below the income limit for Roth IRA and will absolutely be contributing.

it is definitely too risky if you leave it up to social security and home equity lines of credit!

I’m not particularly interested in retirement (it’s 40 years away!) but I feel like retirement age will probably increase by the time I get there anyway. Right now I enjoy working, and I hope to work most of my life. Nevertheless, I feel 100% responsible for my own financial health so I’m saving for retirement myself. I have an employer pension and my own RRSP’s plus additional savings. I feel like it’s dangerous to just count on one source, especially if it isn’t you.

My observation is that people who stay active with some kind of work fare better in ALL ways late in life. I have no intention of “retiring” in its sense of “stopping work.”

My strategy, given that I am squarely at the midpoint of my projected lifespan, is to continue squirreling away money, but to focus more on achieving a 100% paid for residence for late in life.

When I crunch the numbers, it looks completely do-able to pay taxes, insurance, and utilities, and to buy groceries, on $1000/mo or less in the area where I want to live later on.

I have already secured certain qualifications that will enable me to work as much or as little as I need to, after leaving the corporate cubicle, in a field much more beneficial to my health than said cubicle.

To me, low cost of living trumps amenities, as I know myself well enough to know that a quiet place with trees and water and plenty to read will keep me quite happy. I don’t need golf courses.

And based on family history and my own lifestyle, as long as I stay active I can expect to remain in good health. It’s the ones who sit down and stop moving who fall apart, in my observation.

There are a few things that you can control. These are:
1. the amount you save
2. the expenses/fees you pay for your investments
3. the lifestyle choices you make for your health

Ideally, you should maximize #1, reduce #2, and eat right and exercise to maintain a healthy body and mind for #3. All of the other factors that are out of your control, especially gov’t programs (!!), only add worry and stress.

As someone who has never really had a ‘normal’ 9-5 job and has been self-employed for a while now, I guess “retirement” may mean something different to me than most. In fact, I’m not really sure what it does mean to me. I stopped trying to maximize income at all costs when I turned 35, so maybe that was the start of a semi-retirement, or maybe it was when I said goodbye to a fairly reliable w-2.

The more savings/investments I have the more freedom I feel, which has led to different decisions concerning work. Therefore, I strive to be financially independent from work income for many reasons, but to completely write-off seeking future earnings is not really one of them.

First of all, Robert is 42? *blink* for some reason I thought you were at least late 50s.

I definitely want to retire, or at least have the option to do so. I’m about Robert’s age and with my company match I’m saving 22% pre-tax toward retirement, but am not quite maxing out the limits.

However: has no one seen Harold & Maude? I have half a mind to go out at 87 under my own steam, rather than try to scrimp and save my way through a retirement with no end in sight. I’m afraid of senility and general infirmity and think it’s not a bad idea to at least CONSIDER taking things into my own hands. I’m not at all advocating death panels and euthanasia – just posing a question that I never see come up in these discussions.

That’s my mother’s position. She is retired and has considerable investments.

But she also wants a certain quality of life that includes some travel, her favourite hobbies, flowers, etc. She doesn’t care for Stuff and knows well how to be frugal, nothing extravagant – but she is sensitive to beauty around her and the experiences that make her happy.

Her investments will likely last into her 80s but may be not into her 90s. She could ensure another decade – but she is not willing to sacrifice what makes her happy. She says she prefers quality of life to quantity, and she truly believes that she will kill herself when she no longer can have the quality she wants.

My grandmother is just about to the end of her life at 95 years old. She has outlived two husbands and ALL of her friends.
My sister and I agree we don’t WANT to get that old. Actually, we joked recently about a suicide pact.

My parents retired in their late 50’s after a lifetime of hard work and frugality… and they are definitely not sitting on their butts all day. They are active in volunteering and helping raise their grandchildren, not to mention hobbies and physical activity to maintain their health. Of course they are living better now than I ever hope to, because they have 401Ks, pensions and social security coming in – their income is greater than mine while I am still working full time. I know my retirement won’t be that cushy, but I am working hard and planning the best I can.

I agree with those who say it is a good strategy to continue to work, whether full time or part-time, as long as you have employment and feel you may need to bolster your retirement resources–given chances of being a nanogenarian or potentially high healthcare costs or whatever the reason. The most difficult aspect of retirement planning is, for me, foregoing appropriately enjoying my hard-earned income now just because there may be a financial crisis or rampant inflation in the decade I turn 67/70.

My husband is 66 and I’m 58. I’d like to retire at 60 as there are a lot of things we’d like to do that a full time job doesn’t allow. Most of these are activities – bike trips etc. that may not be available to us later as our bodies age. If I can find part time and flexible work, great but I recognize the difficulties.

So, we’re saving more than the numbers say that we need – to make up for the risks listed above. We are living below our means – and we have a paid for house which we don’t see as a piggy bank but simply reasonable cost housing. We keep running the numbers. Robert Brokamp has a job with a fair amount of flexibility I’d expect – and doing something he enjoys. It isn’t that way for all of us.

On the other hand, I don’t think we should view retirement as a sudden cut off. My husband no longer works at a full time job. As a teacher he works part time and tutors. He can substitute if we need money. I’m also willing to work at something part time if needed.

The key is flexibility. You need to look at each of these risk factors and say, “What would we do if this happened?” Could we adjust our spending? Could we go back to work?

By the way, thanks for writing about retirement. We’re facing it and thinking about it a lot. I’d like to see more articles about retirement on the blog.

Only a privileged few will have the luxury of retiring and resting on their laurels. Retirement is risky, and it’s incumbent on all of us to maintain job skills and continue learning in order to be employable.

The presence of this risk, however, does not necessarily mean that folks have to continue doing the same jobs or making the same amounts of money. More creative ways to make money exist now than at any point in history, and that means that retirement can be a dynamic and fulfilling experience. Thanks for the insights!

So many good points here. All in all, one can only rely on themselves. I find extreme value in my work, so I don’t think I will mind working as I get older. I may want to scale back in terms of hours and stress, but still work. Passive income, such as rental properties, is another nice buffer to keep money coming in…but, as you point out, real estate can be extremely volatile. Good thing I’m only 25!

While I totally agree retirement should not be a primary aim, I don’t think the reasons listed in this post are too convincing. They’re nearly all based on fear-thinking — the possibility of worst case scenarios. I’ve never found my best decisions are made in that frame of mind.

The drive for most to retire comes from living our daily lives in a hectic, often unfulfilling way. That’s the problem that needs to be solved. We can do that through creative work and lower-overhead living at any age!

Finally, people staying in the workforce should actually improve the economy. Adding older consumers should have an effect similar to that of adding more women after WWII…more money, more demand, more spending.

Retiring scares me a little…how am I supposed to suddenly stop putting money in and just take it out? We spend 65 years saving, then we’re supposed to stop saving, stop earning, and start spending? That will take a lot of mental mind games!

Retirement for me means vo longer working for someone else. I plan on doing a variety of things including blogging, volunteering, visiting grandkids and traveling. I want to be busy doing what I enjoy.

I retired in 2006 at age 50. I had always lived below my means and despite lots of fluctuations in the stock market, have maintained my net worth. My health has improved, I have become more well-rounded, and I have had time to nurture my important relationships. My former colleagues still enjoy their careers and are well-compensated but all are at least 30 pounds overweight, have little time to exercise, are under a lot of stress, work very long hours, etc. Their financial risks are lower than mine because 1) they continue to earn money and 2) their lives will be shorter. I have no regrets about retiring as early as I did.

It seems it is prudent to put some of that savings in silver and gold coins. I was fortunate enough to follow the advice of a friend who made his personal fortune in real estate and precious metals. I put around 35% of my retirement funds in silver and gold American eagles back in 2004, put it in my bank’s safety deposit box and forgot about it. Just a month ago I decided to check the prices of gold and silver and was shocked the prices skyrocketed.

The Pension Benefit Guaranty Corporation (PBGC) guarantees private pensions up to a maximum amount based on age. If you’re 65 years of age or older then the annual max is over $55,000. (max is lower if you retire early) If your pension benefit is under the maximums then you should get it all. If your pension is over the maximum then you’re capped at the maximum. I would guess that the vast majority of people don’t have pensions paying over $55k a year. I know one company that went bankrupt in 2004 and the PBGC paid the full benefits for 99% of the workers.

THe PBGC also fights to preserve pensions in bankruptcy without taking over the payments and they often succeed. So just because a company goes bankrupt doesn’t mean the pension won’t survive without the government stepping in.

OTHER benefits like retiree health insurance are in larger jeopardy. If your company goes bankrupt and they pay retiree medical then you could lose that outright.

I’m still working. Though I’m 55 years old. I feel strength and my health is rather good. I don’t feel stress at my job. Actually I feel bad when I don’t work, when I don’t do something. I don’t like get back home every evening, I would willingly stayed at the office and continued working. My family don’t understand me, dom’t like my enthusiasm. But I can’t go another way. I don’t want retire and fade at home by the Tv-set. I will sooner die than surrender. And I know, that I’ll die on my work place.

Previously mentioned… real estate passive income. My mom now 86 and dad 90, retired at 62 from custodial jobs. We are from a 3rd world country. I learned from them that rental investments keep up with inflation, are most likely to bounce back from market swings, and certainly do much better than “expert financial planners” because the income stream is never ending. That inheritance helps the next generation, if used wisely. Add to that a living way below your means and at least a lot of the financial stress is significantly reduced. They are fortunate to have relatively good health. They didn’t know what a 401k or stock option is. I’m the “edumacated” one that took a beating in the market while they did well. I no longer have a 401k, stocks, bonds, etc. Real estate is my retirement vehicle, but then it’s also not for everyone. I sincerely wish a good, happy, and healthly retirement to all.

Seems that the underlying question here is what the definition of ‘retirement’ is. Determine what that is and if you agree and then that’ll lead you in the right direction.
I plan on working at something for as long as I can (for pay or not) and plan on saving for the worst. Perhaps the younger generation (my self included) is so tech driven that we don’t listen to the advice of our elders?

I’m 29 but I don’t plan on working forever. First of all nobody knows the future, so save, save, save. Your advice about not retiring is good if you have your health by then.

Life is so unpredictable the best way to prepare is to save as much as possible. Yes I would LOVE to stay active, but I know that life can be both beautiful and cruel.

The future is unknown, should the unfortunate happen its nice to know that you have money in the bank. Besides life is as expensive as you make it.

People get too freaked out about retirement, mostly because the retirement industry scares them, you as a consumer need to see retirement as a product they’re trying to sell you. Yes its CRUCIAL to save for retirement but realize its also a product. Be a wise consumer.

Unfortunately some people with $4 million portfolios are still too scared to retire right now because the retirement industry has got them scared. I hate that. Articles like this don’t help. At some point you have to say to yourself “hey there are no guarantees, my portfolio looks good, I think I will retire.”

Some ideas that might help:

1. Choose a high income career, or build a business that you will be able to grow over time. Even if you go into something that is low-paying find a way to be the best at what you do, people that usually do this can make money and will always have a job.

There are graphic designers who make six figures and those that make minimum wage. The smart ones find a way to monetize their interests.

2. Choose an affordable area until you can move into the area you want. My parents live in a nice house as retirees with the mortgage paid off. They’ve always been savers, they don’t feel deprived, and they never had debt, they spend consciously and are happy.

3. How much is enough? Ask yourself that. Otherwise you’ll be like a hamster chasing the wheel, always stuck in a treadmill that you can’t leave.

I’m not against stuff, but some people overspend themselves into debt and have so much stuff that they need to rent storage space. At some point you have to ask yourself how much is enough.

4. Spend consciously. I don’t have cable, I have chosen to get Netflix, Hulu Plus, Amazon Prime and ITunes. I don’t feel deprived. I have Skype and a pay as you go phone. We have a flat screen tv that we saved up for. I signed up for Pandora music. There’s a library across the street.

Many things have gotten cheaper in the 21st century. Marketers sell to every income level. We have easier access to entertainment and its gotten cheaper too. In our grandparents days you had to buy the whole record, you couldn’t just buy one 1.99 song.

Clothes have gotten cheaper too. You can buy a whole affordable wardrobe at TJ Maxx or Macy’s or Nordstroms if you want. The point is you have so many choices on how much or how little you want to spend.

My mom taught me to look for quality materials during sales. We have more sales in the 21st century than our grandparents ever had in theirs. As a result we’ve spent $4,500 refurbishing an entire apartment this included the bed.

Everything I bought I will take to our new house when we move. I will keep them until they wear out and break. I’ve learned from my parents to buy furniture once, buy what you like, but don’t redecorate every 2 years to what the trends are. Buy something of quality and your liking, and keep it until it breaks.

Dave Ramsey’s book taught me to ask for deals. All you have to do is ask. The worst they can say is no. Its possible to live on less than you make and not feel deprived. Its possible people. The future doesn’t have to be bleak.

My parents are baby boomers and they did it, anyone can do it. If you’re healthy and willing to work then you can do it. I’m so tired of the pessimism of retirement articles. Keep spending in control and please save more than 10%. These days 10% is outdated advice.

I’m not sure what you mean by, is retirement “too” risky. I figure I will always want to add value somewhere for someone. My hope is that I’ll be able to make money by doing it. I see myself as an entrepreneur and that I’ll be able to earn money in the future without the feeling that I’m “working”. At retirement age, I hope to have a sizable nest egg as well as still have the urge and ability to make a contribution to something I’m passionate about, therefore being able to support myself. I guess if something happens to me and I’m not able to work, I still hope that my nest egg will be able to support me. I think retirement is definitely an unknown. It’s scary in that way. Is it risky? I guess so, but so is life in general. Just being an adult is risky and scary.

i am worried most about the 6% of my paycheck that i have no say over. there is no choice about it,it is taken and put into a state retirement system…and that system is horrible. so it feels like i am giving my 6% away. by the time i retire, it will be gone. i wish there was a way to refuse to give it up.

I am 42 and can’t picture a complete retirement where I spend my days doing woodworking and playing golf. I think I would go crazy within a few weeks. Don’t get me wrong – I certainly imagine a change of career and reduced hours and stress, but I think it is healthy to stay engaged in something productive.

I have recently watched the health of two close relatives deteriorate rapidly after retirement. By no means a clear cause and effect relationship, but I do believe that we are made to be engaged in some kind of work.

Great article!
Reitrement is not a historically old concept. Meg stated earlier that kids were a part of her retirement plan. This has been true for most people before recent times, whether one thinks this is valid or not.
Even with the best-laid plans, things don’t always go the way we think they will. I’m pushing 60 and work less than I used to but still work daily from my home and do not plan to retire. We have multiple sources of income, most of it comes from income properties, but we still are motivated to keep working because of the state of the economy and my costly health conditions.
If one is able to work in their elder years, even minimally, one is likely to live longer and have a more optimistic outlook; besides earning income.

I’m surprised everyone’s parents are such poor planners. Mine, like many of the older generation, were not told to save for retirement. They have a very modest IRA they aren’t touching at all. They live off my Dad’s pension which is half his former salary and paid off their house before they retired. They drive a few used cars, own an RV that they take trips in, and my Dad occasionally works a part time job for his own amusement. He was THRILLED to get out of the workforce and when he does his part time job enjoys that it is not the same rat race as his career had been. My Mom like many on this comment thread was forced to retire early when her position was eliminated and should could not find another job.

I’m planning to work at least until 65 if I can (so I can at least get medicare, otherwise I don’t see how people get healthcare). But I also know that an early layoff or my health might prevent this from being a real possibility. I also think it’s sort of sad how many of you are planning to off yourselves in your old age. Do you really think you’ll have any less interest in life than you do now? Do you really think “old” folks are so drastically different from you? My grandma lives in a home and can’t walk. But otherwise she’s pretty positive about her life and what she has going on for herself. To me it’s depressing but to her it’s perfectly fine and she will continue to live for as long as she is able.

I seem to be the reverse of many folks here in that my retired parents earn/make FAR less than I do now, but planned well, eliminated all their debt, and live a very frugal lifestyle that means I will probably never have to be responsible for them. My backup plan if they need support as they lose their health is of course the house can be sold to pay for that.They both supported my grandmother in their home for years and are adamant that none of their children will have to directly support them,

Mine too. Actually, one of my own parents and both my in-laws were so frugal when we were kids, they are enjoying a much higher standard of living now. My other parent is still working and plans to until he dies, despite pretty serious health problems.

But my friends…at least half of them are already having to worry about this, with parents in their 50s or early 60s. Already two of my friends have had parents die basically indigent, and had to scramble to pay funeral costs.

Every time one of our folks talks about “estate planning” and wanting to make sure there’s something to inherit, we tell them we’re just grateful they’re not having to “borrow” grocery or rent money.

Of course, the more one saves, the less risky retirement can be. That being said, most of us have a long way to go to truly be in low-risk territory. Those factors mentioned above are quite real – health care being one that immediately caught my attention.

The opportunity to live a life filled with purpose until death, coupled with the financial support to do so, is the most neglected aspect of retirement planning. People nearing retirement need to think about “what they will do when they grow up” (to borrow the AARP promo tagline) as much as they think about how to fund retirement. At 58, that is a central concern in my pre-retirement planning. Creativity & passions don’t decline with age. Also, if you talk with recent retirees, after about 6 months, they’ve spent extra time with grandkids, finished delayed home repair projects, etc., & they’re now ready to plug in to purposeful projects. For some, that mean returning to work at least part-time. The concept of an encore career (see encore.org) & a Purpose Prize (for those 60+) helps to highlight this neglected line of thought (see encore.org/prize). Every community needs a “purposeful projects” center to tap into the wellspring of untapped talent of those who still want to work beyond traditional retirement age, start a business, or volunteer. UNC-Ashville has such a program that deserves replicating elsewhere: ncccr.unca.edu

realestate on a small scale is good, especially if I can become a small business for tax reasons as well as handling / using deferred income in a smart way. I was told that banks can help establish small businesses and help setup FINs. Is this true?

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My name is J.D. Roth. I started Get Rich Slowly in 2006 to document my personal journey as I dug out of debt. Then I shared while I learned to save and invest. Twelve years later, I've managed to reach early retirement! I'm here to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you get rich slowly. Read more.

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